David Fuller's view I concluded my assessment yesterday by saying: I suspect the odds are in favour of either [scenario] 1 or a combination of 1&2 (Click on 'Previous Item' immediately beneath my name above to review the three scenarios.) The late tumble from yesterday's highs for oil prices (Brent & NYME) offers some respite, thanks to Saudi Arabia, but investors are likely to remain nervous and markets volatile against the background of recent uprisings in the Middle East.

It would be an oversimplification to say that oil is everything, but it is obviously hugely important. Our global economy runs largely on crude oil, like it or not, so it is the most important commodity by far. This was true during most of the last century, it is true today despite coal, natural gas, nuclear, hydro, geothermal and renewables, and it will probably remain true for at least the next 10 and possibly the next 20 years.

Every oil spike of consequence has been followed by widespread recession, not surprisingly, so the current situation is delicately poised. It the Middle East settles down once again and major supply disruptions in global supplies of crude oil are avoided, a seriously destructive spike in prices can be postponed.

Affordable energy is bullish for global GDP growth in what Standard Chartered believes is a global GDP supercycle (See their report by Gerard Lyons is in the Archive). Fullermoney agrees.

Incidentally, commodity and GDP supercycles of a generation or more are punctuated by recessions, as we saw in 2008-2009, and will most likely see at least one more time in the current decade, subject mainly to energy prices, which are boosted by GDP growth. Consequently, to avoid slumps the world needs all the energy it can generate from the various sources already available and also in developmental stages.

Against this background I feel comfortable with and intend to maintain an equity portfolio overweight in energy, currently, mainly via Royal Dutch Shell for yield and uranium miners for speculative growth. Recent and unresolved events in the Middle East can only intensify the already considerable efforts by many countries to increase energy efficiency and especially supplies.

The global equity environment remains both interesting and challenging. Interesting in that the cyclical bull market - currently between recessions - should continue over the medium term provided that commodity prices and crude oil in particular do not move significantly higher. The supply situation for agricultural commodities remains perilous, with food shortages of particular concern. This problem simply cannot be resolved without a big improvement in crop yields, which cannot be achieved in the near term.

Largely for these reasons, I maintain that the equity environment will remain volatile. This creates risks but also opportunities. For instance, Asia currently looks more attractive to me than the West. That was not the case from late November 2010 and into February. However, mean reversion corrections in Asia have resolved previously overbought conditions and made valuations competitive once again. When concern over commodity prices subsides (this will remain a very important proviso), Asian and resources markets should resume their long-term relative outperformance. The US and Germany have only just commenced what is likely to be their mean reversion corrections, if not now, then over the medium term.

This review of asset classes will resume next week. (See also Eoin's comments below.)